The Slope of Dysfunction

Perhaps you have heard of the Peak Oil theory? Most people have by now, even the people whose job used to involve denying the possibility that global crude oil production would peak any time soon. Now that everybody seems a bit more comfortable with the idea, perhaps it is time to reexamine it. Is the scenario Peak Oil theoreticians paint indeed realistic, or is it firmly grounded in wishful thinking?Here is a typical, slightly outdated Peak Oil chart. I chose it because it looks pretty and conveys the typical Peak Oil message, which is that global crude oil (and natural gas condensate) production will rise to a lofty peak sometime soon, and then drift down gently, over several decades, until, by the year 2050 or some other distant date, less than half as much oil will be produced globally. Since this would still be a very impressive number, and since we have decades to adjust to living with half as much oil, this would not necessarily pose a major problem. Some combination of new energy from wind, solar, biomass and nuclear sources, coupled with efficiency improvements such as light rail and electric cars, better-insulated buildings and so on, would allow us to plug up the gap.

Peak Oil theorists base their calculations on data from the many oil-producing provinces that have already peaked, such as the United States, which peaked in 1970. The majority of oil-producing provinces and countries are past peak now, providing the theorists with a wealth of precise data. But they seem to have overlooked one little detail, which, I believe, is rather important. What do countries do when they reach their peak and can no longer supply themselves with sufficient quantities of oil from their depleting domestic sources? They turn to imports, of course. They can do so if their local peak comes before the global peak; they cannot do so if it comes after. This makes local peaks poor analogies for the global peak.

And what happens if a country cannot import oil to make up for the production deficit? It just so happens that we have a convenient example of just such a scenario unfolding: post-Soviet oil production after the collapse of the USSR. There, production declined 43% between 1987 and 1996. The decline was arrested and reversed by the introduction of foreign investment and technology (Source: Marek Kolodziej and Doug Reynolds, ASPO Workshop, Lisbon, Portugal, May 19. 2005).

Note how just around the time of the collapse oil production goes into free-fall, which is only arrested in mid-1990s. Had the Former Soviet Union remained economically isolated, the free-fall would have continued. Kolodziej and Reynolds drew some interesting conclusions based on these data. Firstly, the crash in oil production preceded collapse in USSR's Gross Domestic Product. The lag time between the two, and the severity of the collapse are clear enough to ascribe causality: to say that the oil crash caused the economic collapse. On the other hand, coal and natural gas production, which also crashed, did so after the GDP collapsed, again, with a significant enough lag time to say with confidence that it was economic collapse that caused coal and gas production to crash.

What actually happens to an economy and a society under such circumstances? With oil in short supply, industrial production plummets, the economy stalls, there is a financial crisis because of debts going bad, followed by a commercial crisis because of falling demand and lack of credit, followed by political collapse caused by dwindling government revenues, followed by social collapse as unemployment rises and crime becomes rampant. After a while of this, the idea of you and your friends going out to the oil field and pumping some more oil starts to seem rather odd, and so oil production heads to zero.

The global oil peak is different from all the little localized peaks in that the planet as a whole cannot import its way out of an oil shortage, resulting in a global economic collapse. The economic collapse will, in turn, cause global oil production to crash even faster, extinguishing the industrial economy.

It seems possible that certain countries which are currently oil exporters might be able to keep the oil flowing, provided they have nationalized their oil production and are sufficiently authoritarian and militarized to quell any unrest. But modern oil production is a technically complicated business (the easy-to-get-at oil is all gone) while the field service equipment and parts delivery system is fully globalized and exceedingly complex. Shocks to any part of the global economy are very likely to disrupt the whole before too long. Nevertheless, it seems likely that some countries will be able to keep their military supplied with fuel, until enough of their equipment wears out.

What, then, of our canonical Peak Oil scenario, which is that global crude oil (and natural gas condensate) production will rise to a lofty peak sometime soon, and then gently waft down, over several decades, until, by the year 2050 or some other distant date, less than half as much oil will be produced globally? Ever eager to present a hopeful vision, I will say here and now that I believe this scenario to be entirely plausible... but it requires alien intervention. As Russian oil production was saved by foreigners, so Earthling oil production must be be saved by aliens from outer space. Here's an updated Peak Oil slide:Although we have absolutely zero data on which to base this assumption, we must assume that oil production throughout the rest of the universe has not peaked yet. Further, we must assume that interstellar vessels will deliver this oil to Earth in a timely manner, making up for any planetary production shortfall before Earth's economy collapses. Further, since Earth has few resources to trade for this oil, let us assume that the aliens will be happy to give us their oil in exchange for a truly excellent recipe for brioche à tête which (for reasons we should find intuitively obvious) no-one in the rest of the universe has been able to perfect.

I read a science fiction story once (can't remember the title or author - if anyone does I would love to hear) The basic plot is that friendly aliens come to earth and give us technology to allow us to expand our population with all getting plenty. One person however is trying to translate a book of the aliens and finally does - it is a cookbook - for cooking humans.

Perhaps the aliens have already been here, and the return (seeming more imminent by the increase in crop circles) will be to harvest the crop.

Dimitry, I have heard that the Aliens like to do experiments on us (anal probes and whatnot). Maybe they would like to keep us as curiosities in their zoos! So then, if the Aliens were to rapture those of us who are not 'stuck in' or 'liberated ourselves into' paleolithic lifestyles to be put on display in their zoos, Earth would be saved due to almost complete depopulation. Yet the Galaxy's zoos would still suffer a homo sapiens shortage! So I guess these rapturers would say to us, "be fruitful and multiply!!!" Perhaps Yahweh/Eloi/Allah is one of those Aliens. Heh. ;-)

this is what I keep reiterating again and again: The problem about peak fossil is nor economics nor technology, because for most uses oil can be substituted / saved - given sufficient time to tackle it. But the real issue is that we won't have that much time. In a discussion about this the manager of a German airline said that the lifetime of an aeroplane (from first design to the scrapyard) is 50 years. For most airlines, tourist destinations etc. this will be just too long to survive.

Your comparison with the USSR still looks a bit optimistic, as you didn't consider the effect described by the Export Land Model: The remaining exporting countries (mainly OPEC) will get higher revenues, increase their GDP, which leads to a higher domestic consumption. So even less oil is left for the rest of the world. As a result the exported oil output may be cut by half within a decade - even without considering the economical turmoil you describe.

Interestingly, the IEA says that all this simply cannot happen because 0PEC would be stupid to starve those who feed them, so OPEC won't do what all other cartels do (raise the price as much as possible), but keep it fairly low, so we need not to worry. What the IEA doesn’t say is that OPEC may also have other, less direct ways to take advantage of it’s checkmate position: The oil sheikhs may for example buy western companies, support oil-dependent structures or demand a military withdrawal of the west from the middle east – just what the victorous West did with the rest of the world after the collapse of the Eastern Bloc.

So these aliens may indeed exist – and they will preferrably speak Arab.Of course nobody knows how the Sheikhs really will treat us – and if they’ll really have so much oil left to keep its leader-saviour position for more than just a few years. But if in this scenario of an OPEC World Order even non-Muslims will have a good reason to pray to Mecca.

USSR's ability to pay for imports was very much hurt by the global decline in oil prices which followed the North Sea and Prudhoe Bay coming on stream. This is one of the things that propelled them down the debt hole. But there was also a physical problem: given their level of production technology (which mainly involved drilling a gusher, then moving on once the flow rate went down) they could not sustain production growth, without which the entire economy started to sputter. Here, the analogy to the world as a whole is fairly accurate, I think. There isn't an extraplanetary source of new technology, and the current level of Earth technology cannot sustain production growth.

So the big question for me is where did the nomenklatura that was able to keep their financial assets safe during the Soviet Union's economic collapse keep their money? Did they essentially take their assets to other countries? If so, where and is the same place potentially safe now?

It would be historically ironic that the nomenklatura of the pre-collapse Soviet Union moved their assets to America during the Soviet collapse and now the American nomenklatura move their money for safety to Russia during the American economic collapse!

The nomenklatura, and, later, the newly-hatched oligarchs, "new Russians", mafia and other kinds of official and unofficial thieves all hid their money outside the country: in Switzerland and various offshores and tax havens. Some of it ended up in the US banking system, to be sure.

But you are asking the wrong question, and so the answer is irrelevant.

During the collapse that follows the global oil peak, by analogy, the only safe place to keep your money would not exist since it would have to be OUTSIDE THE PLANET, so plan accordingly (or maybe not, since it would be a waste of your time). It is certainly possible to survive without money - the Russians did.

I think you're setting up a straw man here. Although I'm not strongly aware of all the strands of Peak Oil commentary I'm aware of what Richard Heinberg and David Holmgren are writing about it, and they're certainly not saying that there will be a gentle descent. I assume you're aware of their writings, so can only assume you wanted to conduct an experiment on USA'ens and see easily how aliens and pop culture trivia could distract them from intelligent discussion. Answer: VERY EASILY.In the rest of the world, we aren't so interested.Holmgren's discussion of energy futures can be found at his Future Scenarios website at: http://www.futurescenarios.org/content/view/16/31/Heinberg's website is http://www.richardheinberg.com/Home.htmlIn brief Holmgren posits four possible future scenarious, i.e. * Techno-explosion, * Techno-stability, * Energy Descent and * Collapsewhich are fairly self-explanatory.Well worth a read, but in the meantime let's talk about aliens,regards,Bob

I recently watched a talk by Heinberg, in which he presented a chart quite similar to the one I posted, showing a gentle descent, not an abrupt end to oil extraction.

Overall, Peak Oil theorists posit that depletion of the world is a composite of the depletions of separate provinces, failing to mention that this is a best case scenario, where geological limits are the only relevant ones.

I believe that geological limits will turn out to be borderline irrelevant because there won't be an industrial economy capable of reaching them.

No, this is not a straw man, this is yet another wall of denial based on whishful thinking.

Oh, and to whoever mentioned the net energy plot on TheOilDrum: yes, that is a much better way to look at it, but it still presupposes that quite a lot of the remaining oil will be extracted, although providing a reduced net benefit. This analysis does say that there is a lower EROEI threshold below which further extraction makes little sense. My analysis says that once global supply stops growing, industrial economies fall apart, and oil extraction stops.

Another Oil Drum post by Gail the Actuary with a graph showing her pessimistic worldwide crude oil production projection may be of interest since it seems to look more like the post-soviet production graph Dmitry shows. (Post-soviet oil production is also discussed in the excellent comment thread following Gailʻs post.)

And I must chide you Dmitry for not mentioning an additional requirement that the aliens be willing to violate the Prime Directive and intervene (like our good olʻ favorite American starship captain, JT Kirk) instead of being non-meddlers like that sophisticated cultured Frenchman JL Picard. (somehow, someway this is connected to brioche à tête)

I am a Canadian who is preparing a post-collapse rural home (with wood heat). One thing I would love to hear your take on is natural gas. Most homes in Canada are heated with natural gas and no other infrastructure exists in the urban areas for home heating. Without home heating, most of Canada is not habitable six months of the year.

How much natural gas is left? Do we need to be preparing now for a a shortage of natural gas? What does peak natural gas look like?

Love this blog.... thank you for all your efforts and most of all for being so damned funny.

The real answer to where the USSR nomenklatura kept its wealth does not need alien analogies. The real wealth came from their control of real assets inside the country. So, if you were an oil&gas ministry apparatchik, you nominated yourself the CEO of the company newly incorporated to manage an oil field or two. That control was later legitimied on paper through rigged privatizations, but effective ownership was there already.

Part of the wealth legitimization came from being able to borrow unlimited sums in roubles and buying privatization vouchers with proceeds, just ahead of hyperinflation (caused by this unlimited borrowing) wiping out the value of their debt.

It seems not to be so difficult to do an excercise in how the world could look like in post-peak conditions.Dmitry Orlov turns to the collapse of the ex-ESSR for inspiration, but one might as well can have a look to present day world, ANYWHERE, except the still well functioning welfare states, most of them in nordic Europe.

As soon as one sets the context of a post-peak scenario of resource scarceness, one can give meaning to whole lot of present day events.

A shrinking economy is an importance consequence of a resource crash. The state will have less tax income, and will need form alliances with large corporations for keeping the country going.

General tendency in many present day countries is already a contracting state willingly (neo-liberalism) or unwillingly, loosing control and direction over major policies, but gaining force in the spheres where it remains most active (army, police, intelligence, banking).

Large multi-national companies are able to rule key high-tech industries, and are able even with resource scarcity to keep running key technologies needed for certain essential high-tech sectors like food production, mining, and chemical industry.

The question remains who will control mobile telephone and internet industry.

Low and middle class citizens loose important security on all levels: employment, health, protection against crime.

In general people are less and less valuable as consumer for the economy. Scarce resources means no new investment projects, means less jobs, means less buying power, means even less investment in new projects. Economy will contract to essential elements. No more paid leisure activities, no more foreign holidays, no more new furniture and cloths each year, no more glossy magazines, no more luxury, foreign, off-season food, less television and expensive action movies. So far so good. Would many environmentalists say. That is what we have been waiting for so long. But ofcourse people will not just accept all this just like that, without some kind of ... motivation. Work hard, in an insecure environment without getting compensated will cause rebellion. The state, mafia and strong corporations backed up by the state and the mafia will take care that rebellion will be very difficult. But by force alone they will not succeed. So we need a new ideology or religion. Something that we have already and the many people believe in already, called: technology. The last prophet is called nuclear fusion. Some people know it is possible (our priests), but the masses BELIEF it is possible, without knowing exactly what it is.

But where will be room for manoeuvre for the free spirits, for the creative, for the responsible in all this?Basically in areas that are not interesting enough for the mafia, and not threatening for the state and multinational corporations. Ofcourse the anti-globalist movement will grow in power, but they will be very quickly be regarded as terrorists or disbelievers in modern technology.

Left-over technology from the consumerist times will be re-used to construct local networks in communication and health care. Laptops can communicate with eachother with local WIFI networks, and need just one linkage to the bigger internet. Local radio stations can be set up. Local social networks, such as immigrant or religious networks, will be functional is helping eachother out in local food, security and education issues. People die of untreated or wrongly treated sicknesses and malnutrition. This looks familiar? Yes, because all the above describes is happening already. Especially in Africa.

When energy gets cheap enough, people who use it to arbitrage its cheap energy content to get stuff done. I do very much like your model. However, there is a ton of built capital globally in the form of machines. Unless the machines are going away, we can use them to extract energy and grow food. In addition, as long as the machines last, they can be run.

The slope of dysfunction will not be smooth. I would expect there to be big burts of coal and natural gas use along the way.

As hard as this collapse was, globally, it wasn't hard enough. I'm not convinced the Slope of Dysfunction has been triggered yet. You need to figure in that humans are now conditioned to accept and work for paper currency--which is a form of credit as even currency is a demand form of credit.

Once the system by which to induce people to work fails--the money system, then yes--your model will trigger. Hey, it could be soon. Maybe it's now. And you'd be right.

"Perhaps you have heard of the Peak Oil theory? Most people have by now, even the people whose job used to involve denying the possibility that global crude oil production would peak any time soon."

Wrong Dimitry , stop 10 random people in the street and put your theory to the test! The critical mass of people having heard , understood and accepted the idea is still way off. That is precisely why we will not change or mitigate our ways until the "stone wall" arrives !!!!

This is an interesting article. In fact, the slope of dysfunction can just as easily represent a curve of the entire total human population going forward, perhaps grouped by race or income level. Fortunately, certain people or blocs will not allow such a curve to occur, especially at this point in history. If this curve should actually take place or be allowed to actually "Zuhr", as an Arab might say, it will be a curve restricted to particular areas and edges of this world. This Beast of a curve is a curve from hell to your audience. No sane, responsible person should permit or allow the possibility of its actually taking place. That's all for now. Thanks.

A quick comment. What we face is not oil depletion but also the depletion of many important materials - and those that are not physically depleted will be very hard or impossible to extract without abundant and cheap oil. I follow copper, aluminum and other metals and the situation is potentially very serious. And obviously, plastics will be much more expensive as oil depletes, and in many cases there is no real substitute in industrial terms.

I think the Orlov scenario of collapse not just of countries but of industrial society is inevitable. As inevitable as a huge decrease in population, I would say.

"Anybody who speaks here of collapse ought to familiarize themselves with the seminal work on the subject, Tainter's The Collapse of Complex Societies. I guarantee a perspective like none other."

Well, even in everyday life you can see complexity taking over. I suspect that beyond a certain degree of complexity (I am talking about a society), people just go crazy, they can't function. No other animal subjects itself to created complexity. And this complexity not only is dangerous for the mind but it threatens survival. The common belief that complexity distributes risk is totally false. It compounds risk for everyone. Think of the food chain in the very complex US society. Or the "medical chain" (!).

I would say that Tainter has it right, as does Orlov, though the latter has a pragmatic framework rather than a theoretical one. The intersection of the two is large, though. Energy, corn, industry, transportation, dwelling and so on.

Something I have been hearing lately bears commenting on, so indulge me. Even in the gossip media they have been hinting at the failure of capitalism. The system in the US has never been capitalism but state-corporatism. The same way that the US (and empires, generally) have never practiced "free trade". What they mean by free trade is that others should let them in but the relation is not reciprocal. A basic tenet of free trade would be the free circulation of labor. None of the imperial powers have ever practiced free trade or the mythical "capitalism" as preached in the books. The basic trick was and is exploitation.

It goes with "defending freedom and democracy", that is, the freedom to steal and exploit.

It will be very interesting to see how the peak oil story develops in this context. Surely there will be attempts to grab and control, and we see very clearly the internal effort to subdue the population -- US, UK are very obvious examples.

We may be headed for a generalized third world structure of 10 per cent controlling everything everywhere (think of Brazil), or for wars that could inflict incalculable damage, or perhaps both.

What should the populace do? Follow Orlov's advice and decouple from the complex systems that are throttling it to death. I see no other viable alternative. Trusting a cancer to cure your toothache is foolish.

One great advantage that people decoupling will have is that they no longer have to think about where they fit socially. That is what subsistence does to you: it keeps you occupied with actual survival. This is not a bad thing and strikes me as a corrective to complexity.

I think a relatively small reduction in oil production year to year (say 5 or 10%) can have a catastrophic result. In other words, the living arrangements and the production and transportation arrangements are so energy dependent that the catastrophe can start quite abruptly.

Figuratively speaking, it doesn't take a huge drop to create a "dust bowl" in a few years. I mention the Dust Bowl because it has been very well studied and in fact is related to the topic at hand.

It seems to me that while the graph of declining oil production might look 'gentle' indeed, almost none of the serious Peak Oil writers expect the effect on society to be gentle -- first of all, there is the minor fact that the world's population is significantly greater now than it was when we passed any equivalent oil usage on the upslope. Second, there is the not-so-minor fact that, regardless of the magnitude of the decline in production, if we have allowed our society to become highly dependent on the greater oil volume, then we will not have a gentle ride down even a shallow slope.

this is also my first post, and likewise I enjoy being entertained and educated by your prose. But I have a question: I recently saw on a Michael Ruppert presentation that the Soviet Union population dropped dramatically after collapse. Could you confirm this please, with figures? Thanks. Keep up the excellent work.

Talking about aliens IS a distraction. What's going on with Michael Jackson?

Iciel asked about Russians dying in the 1990s. In the corporate media, the collapse of the USSR is not called collapse - it's called "freedom". And the dieoff is referred to as "a drop in the life expectancy" (by 9 years in one year).

This is my first visit here and first post. I was guided here by a friend. I must say, your analysis is right on. The soft glide down would be nice but I have a feeling you are more right than wrong on this.

I think that the aliens may take old Monty Python or Mystery Science Theater DVD's as trade for the oil. After all, Earth, Western industrialized society humor is seen as quite unique in the universe. Possibly even a South Park episode or two. There are some alien and cow parodies they may appreciate. At the very least, this humor shows our society's creeping insanity.

The aliens are the people who think that it is valid to compare oil depletion profiles of countries to the depletion profile of planet Earth as a whole. In order to maintain production within a declining province, a functioning economy is needed. To keep an industrial, oil-based economy functioning, oil imports must be substituted for falling domestic production. For separate countries, these imports can come from other countries, but only until global Peak Oil is reached. For the planet as a whole, these imports can only come from some other planets, clearly. And so the Peak Oil theorists who predict a gradual production decline for the planet as a whole must have a few other oil-bearing planets up their sleeves, or their predictions would be baseless. Therefore, we must conclude that they are space aliens, or, much more realistically, just have a tendency to think like space aliens. This is, of course, ridiculous, which is exactly the point I was trying to make. I was surprised that so many people didn't get the joke.

"And so the Peak Oil theorists who predict a gradual production decline for the planet as a whole must have a few other oil-bearing planets up their sleeves, or their predictions would be baseless."

The "alien card" up their sleeve is that technology will provide something so magical that we will stop caring about oil. That is crazy reasoning, supported by nothing, but it doesn't prevent people from talking like that. You can see them on television. They preach with certainty that something will save industrial civilization (they are careful not to use the term "industrial civilization", though). They are fools, not only because large sources of energy are hard to find and harness, but also because a collapse will bring down the research and the industrial capacity to find any such magic measures, assuming that they exist in viable ways, which is unlikely.

It's ironic that the US talks about "failed states" in the Third World, but is on the verge of becoming the biggest failed state in history.

What happens to Canada and Mexico in the collapse scenario? The fate of both nations seem to be inextricably linked to that of the US.

Doesn't a US collapse also portend a collapse of the center in Mexico, with massive northward emigration of Mexicans, not necessarily in search of jobs, but just survival commodities?

Doesn't it mean the southern border of the US will be overrun, leading possibly to a border war between the two countries -- with the successors of the drug cartels on Mexican side, fighting racist militias on the US side?

Also, isn't the best strategy for some now to simply use whatever credit they have to buy gold and commodities, knowing that in a few years, even if they've defaulted on 100 credit cards, the damage to their personal credit will mean nothing, but at least they'll have amassed something akin to concrete, survival-oriented assets?

It's not at all clear what will happen to southern and northern neighbors - they may end up as separate provinces and estados. The southern border of the US is likely to dissolve. The northern border is less relevant, although Vermont probably belongs on the other side, and the northern border of Maine is most inconvenient. I don't expect that political maps will be redrawn, but political centers will have little influence, and facts on the ground will not correspond to lines on the map.